The UAE Ministry of Finance has announced the launch of Phase 1 of the Research and Development (R&D) Tax Incentives Programme, marking a significant step in strengthening the country’s innovation ecosystem and supporting long-term economic growth.
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Key Features of the Programme
Under the first phase, eligible businesses can benefit from a non-refundable R&D tax credit of up to 50 per cent on qualifying expenditure, capped at AED 5 million. The incentive is designed to reduce the cost burden associated with innovation-driven activities and encourage increased private sector participation in research and development.
The tax credit applies to genuine R&D activities conducted within the UAE, aligning with the country’s objective of fostering advanced industries and emerging technologies.
Policy Rationale and Global Alignment
The programme has been developed in consideration of evolving international tax frameworks, particularly the Organisation for Economic Co-operation and Development’s Pillar Two framework. Within this context, a non-refundable tax credit structure is expected to provide a more stable and predictable effective tax outcome for companies operating in the UAE.
Supporting the Corporate Tax Framework
The introduction of the R&D incentive reflects the early-stage development of the UAE’s corporate tax regime. The design of Phase 1 prioritises ease of administration while ensuring targeted support for businesses engaged in innovation-led activities.
Additionally, the initiative enables the Ministry of Finance to collect relevant data and insights that will inform future policy enhancements.
Insights derived from Phase 1 are expected to guide the development of subsequent phases of the programme. Future iterations may expand the scope and structure of incentives to further strengthen the UAE’s position as a global hub for research, innovation, and advanced technologies.
